Dedicated to Deposits: Deals, Data, and Discussion

WSJ Banking Articles of Interest - Fed Regulators and CDARS

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This WSJ article from today reports on how the Federal regulators have issued more memorandums of understanding so far this year than all of last year. As the article describes these are "secret agreements that can force banks to take steps including raising capital, cutting back on risky loans and suspending dividend payments." However, they are not meant to imply that a bank is at risk of failing. Sometimes these do become public when the banks choose to disclose them. The article mentions the following banks which have confirmed these memorandums: Imperial Capital Bank, PFF Bancorp and National City.

If you have trouble accessing the WSJ article, you may be able to access it via Google News. That's how I was able to read it. This Reuters article also has a overview of this report.

CDARS

WSJ also had another interesting banking article over the weekend which described how multibank systems are being used to insure deposits over $100,000. It described the CDARS service which allows you to purchase a CD for up to $50 million from one bank. The deposit is spread across banks around the country so that all of the deposits are FDIC insured.

The main problem with CDARS is that they usually have lower rates than what you can get with CD specials. I just reported on an example of this yesterday in this post on Unity Bank's CD promotion. It had a special 60-month CD with a 5.25% APY. A CD in the CDARS program with the same term only had a yield of 4.80% APY. Another example of CDARS rates is at AARP Financial Savings Center. One difference in this CDARS program is that they only offer insurance up to $5 million.

In addition to CDARS, some banks have a similar CD program. One that was described was Synovus Bank and its Shared CD program. It offers customers up to $3.5 million in FDIC-insured CDs by spreading deposits in CDs across 35 Synovus network banks

In this August 11th post I reported on a CD special at a Synovus Bank in Southwest Florida. I called one of their branches, and I was told that this CD special could qualify for this Shared CD program.

Thanks to the readers who emailed me these news articles.

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